This article is about the marketing term. For the financial term, see Cost of carry.
In marketing, carrying cost, carrying cost of inventory or holding cost refers to the total cost of holding inventory. This includes warehousing costs such as rent, utilities and salaries, financial costs such as opportunity cost, and inventory costs related to perishability, shrinkage, and insurance.[1] Carrying cost also includes the opportunity cost of reduced responsiveness to customers' changing requirements, slowed introduction of improved items, and the inventory's value and direct expenses, since that money could be used for other purposes. When there are no transaction costs for shipment, carrying costs are minimized when no excess inventory is held at all, as in a just-in-time production system.[1]
Excess inventory can be held for one of three reasons. Cycle stock is held based on the re-order point, and defines the inventory that must be held for production, sale or consumption during the time between re-order and delivery.[citation needed] Safety stock is held to account for variability, either upstream in supplier lead time, or downstream in customer demand. Physical stock is held by consumer retailers to provide consumers with a perception of plenty. Carrying costs typically range between 20 and 30% of a company's inventory value.[citation needed]
^ abRussell, Roberta S.; Taylor, Bernard W. (2006), Operations Management: Quality and Competitiveness in a Global Environment, Fifth Edition, John Wiley & Sons, ISBN 978-0-471-69209-6
In marketing, carryingcost, carryingcost of inventory or holding cost refers to the total cost of holding inventory. This includes warehousing costs...
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(}1-{\frac {d}{p}}{\bigg )}} Total carryingcost = C C Q 2 ( 1 − d p ) {\displaystyle {\text{Total carryingcost}}={\frac {C_{C}Q}{2}}{\bigg (}1-{\frac...
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